What did our elders ever do for us? They spent more on education for one thing.

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April 14, 2015

What has distinguished one Dutch cabinet from another over the years? Economist Mathijs Bouman goes down memory lane.

Last Thursday Piet de Jong became a centenarian. The submarine commander turned prime minister took the helm between April 5 1967 and July 6 1971. In the year he stepped down, Mark Rutte and Jeroen Dijsselbloem went to kindergarten. Halbe Zijlstra celebrated his second birthday. Diederik Samsom was born four days later and Lodewijk Asscher wasn’t even a twinkle in his father’s eye.

The toddlers and babies of those days have grown up and are governing the country. Are their priorities any different from those of that earlier generation? Has government expenditure grown or shrunk in the intervening years?

Public spending

In 2015, Dutch public spending will end up marginally higher than in 1971: 45% of gdp compared to 43% in De Jong’s final year as prime minister.

At 45% it is at its lowest since the start of the credit crisis in 2008, and well below the average percentage since 1971. Under Labour prime minister Joop den Uyl public spending shot up to 49% of gdp, and in spite of a programme of reforms, successor Dries van Agt and his prudent finance minister Onno Ruding, both CDA, saw it go up to 57%. In 1987, CDA prime minister Ruud Lubbers set the record with 58%.

Under control

Lubbers eventually managed to get public spending more or less under control. In 1994, his final year as prime minister, public spending was reduced to 51% of gdp. It wasn’t until 1999, when Labour leader Wim Kok became prime minister (and Gerrit Zalm his finance minister) that public spending was brought back to the Piet de Jong level of 43%.

Under CDA prime minister Jan Peter Balkenende’s four cabinets the percentage varied little. The credit crisis pushed it up to 48% in 2008 and at 45% in 2015 we’re back to what it was in 1971.

Priorities

But that is where the similarity ends. The priorities of the present cabinet of Mark Rutte and Lodewijk Asscher couldn’t be more different from 34 years ago. We are spending much more on health care, a well-documented but still astounding increase. Public spending on health tripled from 2.9% of gdp in 1971 to 9.6% in 2015.

An aging population, developments in medicine and greater public demand for higher standards are developments which take place largely outside of the political arena. But the often heard story of relentless cutbacks on health care is groundless, at a macro-economic level at least.

Spending on social security, however, has taken a hit: currently at 12.7%, it is just a little higher than De Jong’s 11%. In 1983 it stood at a whopping 20% of gdp.

Education

What else? In 1971 defence spending was 2.8% of gdp, now it is less than half. Infrastructure accounted for 2.9% under De Jong, now it is 1.4%. Subsidies for companies are down significantly too. And shockingly enough, this cabinet is now spending quite a bit less on education: 5.3% compared to De Jong’s 6.4%.

The low interest rate is advantageous too. De Jong paid an interest rate of 2.5% of gdp on a much lower national debt. Rutte’s bill comes to 1.3% of gdp, the lowest percentage of the post-war years. However, we don’t have a Dutch prime minister to thank for that but the Italian president of the ECB.